Inheritances and Bankruptcy

What happens if you are going to receive an inheritance during the bankruptcy?

11 USC §541(a)(5) defines property of the bankruptcy estate as:

Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date by bequest, devise, or inheritance.

Translated, this means if you are going to receive something from a deceased person or someone dies within 6 months of your bankruptcy filing whom you are going to inherit something from, your potential inheritance is an asset of the estate that must be exempted, or the trustee may use it to pay creditors.

It is important to note that the Code limits it to assets you receive by “bequest, devise, or inheritance.” This means assets you receive by a will or by intestate succession. It does not include things you get by action of a trust, joint tenancy or Pay-on-Death accounts.

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